Do used Diesel cars still make financial sense?

Posted by Zahari Mladenov on 04 June 2008, 11:29 AM

Over recent years the rising cost of motoring has led growing numbers of consumers to abandon petrol cars in favour of fuel-efficient diesel alternatives. However, analysis by EurotaxGlass's has revealed that the typical three-year-old used diesel car* will need to be run for a further seven years before the financial benefits outweigh those of a comparable second-hand petrol model.

EurotaxGlass's, publisher of Glass's Guide, found that the average three-year-old mid-sized family diesel car currently costs between ?600 and ?800 more than its petrol counterpart to buy, but the annual fuel bill is currently only ?105 less. Only after seven years will the lower fuel bills compensate for the higher purchase price.

Annual fuel costs for a typical three-year-old diesel car currently stand at ?1,373 – up 25 per cent, or ?273, over May 2007. For the equivalent petrol car, fuel bills are now ?1,478, up 15 per cent, or ?186, compared to May last year.

"As well as the prospect of lower fuel bills, some consumers are attracted to used diesel models in the expectation that depreciation will be lower compared to an equivalent petrol car," explains Adrian Rushmore, Managing Editor at EurotaxGlass's. "However, if the average three-year-old used car was retained for seven years in order to make the most of the lower fuel prices, the premium over a petrol model of the same age might, by then, only be around ?100."

The used car market has not yet had time to react to the dramatic year-on-year increases in fuel costs, suggests Rushmore. "Our view is that rising fuel costs will bring a further acceleration in the depreciation of fuel inefficient cars, although some highly aspirational sports models may not suffer to the same degree.

"While there is nothing to suggest that prices of used diesels are falling faster as availability increases, clearly the broader financial argument for diesel ownership is becoming less persuasive. For diesel cars to remain in favour, they may need to rely more upon driving characteristics rather than any compelling financial considerations."